USD/JPY is on its edge as divergence in policy speculations between Bank of Japan (BoJ) and Federal Reserve (Fed) outweighs the modest losing downside. Still, the interest rate hike for the BoJ in its meeting next week leaves a stark divergence from the probability of Fed lowering interest rates into the latter end of this year, which somewhat caps the serious losses for JPY. The USD/JPY pair continues to show resilience, holding below the key psychological mark of 155.00, amid a broader risk-on sentiment reflected in positive equity markets. Traders are treading cautiously, awaiting clarity from the BoJ’s policy decision, which will likely shape the near-term trajectory of the JPY. Meanwhile, technical indicators suggest limited bearish momentum, with spot prices poised to test immediate resistance near 156.00 or potentially climb toward multi-month highs if buying pressure sustains.

KEY LOOKOUTS

• Anticipated BoJ rate hikes and Fed rate cuts fuel contrasting market expectations, influencing the USD/JPY pair’s movement and limiting the Japanese Yen’s downside.

• USD/JPY traded in a stable manner below 155.00, and with oscillators demonstrating weak bearish traction, there is a rather cautious mood for traders as the market waits for some clear technical breaks.

• Upbeat equity markets have also negatively impacted the Japanese Yen’s safe-haven status, thereby allowing tailwinds for the pair’s recovery to key resistance.

• Traders are awaiting the much-awaited BoJ policy meet, with the outcome to heavily influence near-term Japanese Yen dynamics.

The Japanese Yen remains subdued as traders navigate the contrasting policy outlooks of the Bank of Japan (BoJ) and the Federal Reserve (Fed). With the BoJ expected to hike interest rates in its upcoming meeting and the Fed anticipated to cut rates later this year, the policy divergence adds uncertainty to the USD/JPY pair’s trajectory. Positive sentiment in equity markets further undermines the Yen’s safe-haven appeal, supporting a modest recovery in the pair. However, traders remain cautious, awaiting the BoJ’s decision, which will significantly impact near-term movement. On the technical front, the USD/JPY shows resilience below the 155.00 psychological mark, while oscillators signal limited bearish momentum, suggesting a measured approach to the pair’s next moves.

The Japanese Yen is still under pressure as the BoJ and Fed policy expectations are contrasting, with the BoJ’s expected rate hike supporting it. Risk-on sentiment undermines the Yen, and traders await the BoJ’s decision for clearer direction.

• The anticipation of a rate hike by the Bank of Japan supports the Japanese Yen and limits its downside potential.

• Divergent expectations of Fed rate cuts later this year create a contrasting dynamic influencing the USD/JPY pair.

• Positive equity market trends weaken the safe-haven appeal of the Japanese Yen, supporting modest gains in USD/JPY.

• USD/JPY holds firm below the 155.00 mark, with oscillators showing limited bearish momentum, signaling cautious market sentiment.

• Key resistance for USD/JPY lies at the 156.00 mark, with potential for further gains toward multi-month highs if buying pressure sustains.

• Market participants remain on the sidelines, awaiting the BoJ’s policy decision to determine the near-term trajectory of the Yen.

• The outcome of the BoJ’s two-day meeting is expected to be pivotal, potentially reshaping market sentiment and influencing JPY movements.

The Japanese Yen remains under pressure as markets navigate contrasting policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed). As widely expected, a rate hike is in store during the BoJ’s two-day policy meeting. Still, later in the year, the Fed could cut interest rates, providing an opposing outlook for the JPY’s downside. This contrast along with broader risk-on equity market sentiment goes against the safe haven appeal of the Yen and hence modestly supports the USD/JPY. However, traders remain cautious, awaiting the BoJ’s decision, which could play a pivotal role in shaping the near-term trajectory of the Japanese Yen.

USD/JPY Daily Price Chart.

Source: TradingView Prepared By ELLYANA

USD/JPY pair has shown resilience, holding steady below the psychological 155.00 mark despite bearish pressure. Oscillators on the daily chart indicate limited negative momentum, suggesting that a sustained break below key support levels is necessary for further depreciation. Immediate resistance lies near the 156.00 level, with potential for gains toward multi-month highs if buying pressure continues. The outcome of the BoJ’s policy decision will be critical in determining whether the pair accelerates higher or reverses course toward key support levels. As traders adopt a wait-and-watch approach, the Japanese Yen’s movement remains highly sensitive to policy signals and market sentiment shifts.

TECHNICAL ANALYSIS

USD/JPY is showing some strength as it is still holding below the psychological level of 155.00 and at the bottom side of a long-term ascending channel. Indicators on the day chart indicate that there is not sufficient bearish momentum for a big decline, meaning a major drop would need a good breakdown and persistent trade below the support of the trend-channel. Some support could be met around 154.50-154.45 and further declines could reach as low as 154.00 round figure and the mid-153.00s. On the upside, the 156.00 level acts as a strong resistance, followed by the 156.25-156.60 range. A breakout above these levels could pave the way for further gains toward the 157.00 mark and beyond, with the multi-month peak near 159.00 serving as a longer-term target. The overall setup suggests cautious optimism for bullish traders while urging bears to wait for clearer signals of sustained weakness.

FORECAST

The USD/JPY pair holds potential for further gains if buying pressure sustains above key resistance levels. The immediate hurdle lies near the 156.00 mark, followed by the 156.25-156.60 region. A breakout above these levels could trigger a rally toward the 157.00 psychological mark. If bullish momentum strengthens, the pair may test the 157.25-157.30 zone and extend gains to the 157.60 level, eventually targeting the multi-month peak near the 159.00 mark. Positive sentiment driven by risk-on market conditions and expectations of a dovish Fed could bolster this upward trajectory.

Downside risks remain limited as the USD/JPY pair exhibits resilience near the 155.00 mark. A sustained break below this level and the ascending channel support could lead to further depreciation. Initial support is seen around the 154.50-154.45 range, followed by the 154.00 round figure. If bearish momentum intensifies, the pair might decline toward the mid-153.00s and eventually test the 153.00 mark. Any dovish surprise from the Bank of Japan or a shift in market sentiment toward safe-haven assets could amplify the downside pressure.